First Time Home Buyers Don’t Want a Starter Home

You heard that right. According to a new report by BR Research, Inc. first time home buyers are bypassing Step 1 of the American Dream. What’s their reason? They’d rather have their first home be their dream home and their forever home– and 95% are willing to make some drastic sacrifices, including continuing to pay rent, until they can afford it.

Call it another facet of the Millennial Lifestyle if you will, but the question remains: Why do these potential buyers value waiting for the home of their dreams more than the very attractive idea of building equity in the meantime?

BR Research reports that over half (56%) of potential first time homebuyers don’t think they can afford the type of home they want, while 28% don’t think they need one yet. You might be thinking that student loan debt is an obvious explanation, but BR Research Generation X. In fact, only 34% of first time buyers mentioned “paying off debt” as a reason they are not looking to buy anytime soon.

First Time Home Buyers Don’t Want a Starter Home

The report gets more interesting as we study these younger generations more closely; BR Research’s report states that today’s first time home buyers are more motivated by emotion than financial factors.

A shocking 66% of buyers expect some form of help from their parents when they do finally buy. Let’s not rush to judge this new crop of NC home buyers though– when BR Research asked recent buyers about how they did with their budgets, 73% say their Down Payment fell exactly where they expected, and 65% said the final cost was within their budget.

What can we learn from this? The generations that will soon make up the majority of the market are going to be more selective and more thoughtful about the home buying process.

Perhaps the most interesting piece of data from this report is that 35% of first time buyers want to retire in the first home they buy. They are going to save for as long as it takes, take a loan from Mom and Dad, and sacrifice nice clothes, traveling, and that new car along the way.

Parents Helping Kids Buying A Home

“Adulting” is the term many Millennial’s think of when they consider buying a home… and they believe they will rely on their folks, (IMHO) because they don’t have any money for a down payment. Often times the stumbling block to home ownership is C-A-S-H! A recent survey showed that more than 1/3 of the first time home buyers looking for a house listed “not enough money” as the reason they were not buying.

The good news is that there are TONS of No Money Down Home Loans available in NC– but in general, the kids are going to need $1500 to $2500 to move, pay their share of closing costs, and get utilities cut on.

Gifts from Parents: The kids can get a gift of the entire amount from family and friends, they can even use a BRIDAL REGISTRY to show who gave them the individual amounts!

Loans For Downpayment: It’s important to know that you can give your kids a GIFT of CASH to use – but you can’t LOAN them the cash for the down payment and closing costs to buy a home.

Co-Signor: If INCOME is the issue, not credit, then you CAN co-sign for a loan with a child. The FHA Non-Occupying Co-Borrower program allows for a minimum down payment of 3.5% in NC – but again, the person who is going to live in the house needs a minimum credit score of 620.

We also believe that one of the barriers to home ownership for Millennial Renters is the ability to qualify for a mortgage, with deferred student loans. Once the loans are out of deferment, and we know what the payments are – it’s really not a challenge. If the payments are “fixed” and we can confirm those, again – not as much of a challenge. However… if the student loans are IBR (and many of them are), with no payments being made, and deferred on a 12 month basis… it can be down right impossible for us to qualify you for a mortgage! Freddie Mac is the best option in those situations.

The USDA Home Loan program and the VA Home Loan Program require no down payment at all!

Steve and I have a goal and passion is to educate First Time Home Buyers NC on the programs available to them to make that dream home a reality sooner rather than later. We consider ourselves specialists on Down Payment Assistance Programs, Mortgage Credit Certificate, and specific mortgage programs that cater to first time buyers.

If you’d like to know what your options are or learn what steps you can take now to set yourself up for qualification in the future, feel free to give us a call. It’s never too early to talk, and we’d be happy to help! Have more questions as First Time Home Buyers in NC? Please call Steve and Eleanor Thorne 919 649 5058. You can also connect with us on Facebook, or check out Steve’s reviews on Zillow!

About Eleanor Thorne

I see myself differently than most loan officers in the Cary/Raleigh market. As a rare Cary native, I see myself as an expert on the area, on mortgage industry changes & factors that effect rates! I’ve lived in Cary since 1968 – and I’m second generation “mortgage.” I work with my husband, Steve Thorne Mortgage Loan Originator #60596 Equal Housing Lender